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To: Mohan Marette who wrote (61580)	8/28/1998 7:34:00 AM
From: Lee	Read Replies (1) \| Respond to of 176387

Morning Mohan,..Re: Any thoughts on CRB breaking the 'mystical' 200 support level? I know everybody is talking about deflation but even though the prices are at multiyear lows, other factors which define deflation are not apparent. An excellent economics reporter from thestree.com, James Padhina explains it this way in the story he filed yesterday. thestreet.com The Invisible Mouth: You Say Deflation, I Say Inflation By James Padinha Economics Correspondent 8/27/98 4:48 PM ET The CPI is broken down into 10 major groups. Food prices are rising at a 2.2% rate. Energy prices are falling at a 5.6% rate. Housing prices are rising at a 2.3% rate. Apparel prices are falling at a 0.5% rate. Transportation prices are falling at a 1.3% rate. Medical-care prices are rising at a 3.4% rate. Recreation prices are rising at a 1.3% rate. Education and communication prices are rising at a 2.1% rate. Other-goods prices are rising at a 6.4% rate. Core-goods prices are rising at a 2.2% rate. Go ahead and assume that each and every one of those indices overstates the real cost of living by a full percentage point. What are you left with? Well, 77.5% of the index is still rising at a 1.8% rate. (Keep in mind that hourly earnings are growing at a 4.1% rate.) Sure, anything that runs on gas is cheaper. So is anything with a chip in it. But lots of other things are not. The fact that many prices are rising only at a crawl probably keeps people from realizing it. Whatever the case, knock it off with the commodities already. Yeah yeah, the CRB is at a billion-year low. But when we talk about inflation we are talking about the consumer prices that people actually pay. No one is rushing to Wal-Mart (WMT:NYSE) to scoop up jugs of tallow. Lower burlap prices aren't making land any cheaper. Blown knees still cost more to fix even in light of cheaper pork bellies. And keep in mind that although the cost of a cup of java goes up every time there is a spike in coffee prices, it rarely ever goes back down. If you get a chance to read it, the whole article was very interesting and he puts in links to referenced data. I think that you'll enjoy the story. There is also a short blurb from the minutes of the June FOMC which illustrates clearly what the Fed is worried about. Sorry about the delay getting back to you but ran into local problems. Best, Lee